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Effects of immigration in frictional labor markets: theory and empirical evidence from EU countries

Listed author(s):
  • Eva Moreno-Galbis
  • Ahmed Tritah

Immigrants are new comers in a labor market. As a consequence, they lack of social networks and other country specific and not directly productive valuable assets affecting their relative bargaining position against employers. We introduce this simple observation into a matching model of the labor market and show that immigrants increase employment prospects of competing natives. To test the predictions of our model, we exploit yearly vari- ations between 1998 and 2004 in the share of immigrants within occupations of 12 European countries. We identify the causal impact of immigrants on natives’ employment rate using an instrumental variable strategy based on historical settlement patterns across host countries and occupations by origin countries. We find that natives’ employment rate increases in oc- cupations and sectors receiving more immigrants. Moreover, we highlight the heterogeneity of this impact across groups of immigrants and host countries along dimensions that affect immigrants-natives relative reservation wages.

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File URL: http://www.tepp-repec.eu/RePEc/files/teppwp/TEPP-wp-14-09-emg-at.pdf
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Paper provided by TEPP in its series TEPP Working Paper with number 2014-09.

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Date of creation: 2014
Handle: RePEc:tep:teppwp:wp14-09
Contact details of provider: Postal:
Université Paris-Est Marne La Vallée, 5 bd Descartes, 77454 Champs sur Marne

Web page: http://www.tepp.eu/

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  1. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
  2. Yann Algan & Christian Dustmann & Albrecht Glitz & Alan Manning, 2010. "The Economic Situation of First and Second-Generation Immigrants in France, Germany and the United Kingdom," Economic Journal, Royal Economic Society, vol. 120(542), pages 4-30, 02.
  3. Ortega, Javier & Verdugo, Gregory, 2011. "Immigration and the Occupational Choice of Natives: A Factor Proportions Approach," IZA Discussion Papers 5451, Institute for the Study of Labor (IZA).
  4. Longhi, Simonetta & Nijkamp, Peter & Poot, Jacques, 2006. "The Impact of Immigration on the Employment of Natives in Regional Labour Markets: A Meta-Analysis," IZA Discussion Papers 2044, Institute for the Study of Labor (IZA).
  5. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
  6. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
  7. Jennifer Hunt, 2011. "Which Immigrants Are Most Innovative and Entrepreneurial? Distinctions by Entry Visa," Journal of Labor Economics, University of Chicago Press, vol. 29(3), pages 417-457.
  8. Libertad Gonzalez & Francesc Ortega, 2008. "How do Very Open Economies Absorb Large Immigration Flows? Recent Evidence from Spanish Regions," Development Working Papers 248, Centro Studi Luca d'Agliano, University of Milano.
  9. Corrado Giulietti, 2013. "Unemployment benefits and immigration: evidence from the EU," International Journal of Manpower, Emerald Group Publishing, vol. 34(1), pages 24-38, March.
  10. Daron Acemoglu, 2003. "Labor- And Capital-Augmenting Technical Change," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 1-37, 03.
  11. Kaivan Munshi, 2003. "Networks in the Modern Economy: Mexican Migrants in the U. S. Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 549-599.
  12. Andri Chassamboulli & Theodore Palivos, 2014. "A Search‐Equilibrium Approach To The Effects Of Immigration On Labor Market Outcomes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 111-129, 02.
  13. Christopher A. Pissarides & Giovanna Vallanti, 2007. "The Impact Of Tfp Growth On Steady-State Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 607-640, 05.
  14. Rachel M. Friedberg & Jennifer Hunt, 1995. "The Impact of Immigrants on Host Country Wages, Employment and Growth," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 23-44, Spring.
  15. Christopher L. Smith, 2012. "The Impact of Low-Skilled Immigration on the Youth Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 55-89.
  16. Yann Algan & Christian Dustmann & Albrecht Glitz & Allan Manning, 2010. "The Economic Situation of First ans Second-Generation in France, Germany, and the United Kingdom," Sciences Po publications info:hdl:2441/536kq4edtr8, Sciences Po.
  17. Abdeslam Marfouk, 2007. "Brain Drain in Developing Countries," World Bank Economic Review, World Bank Group, vol. 21(2), pages 193-218, June.
  18. Nanos, Panagiotis & Schluter, Christian, 2014. "The composition of wage differentials between migrants and natives," European Economic Review, Elsevier, vol. 65(C), pages 23-44.
  19. Ortega, Javier, 2000. "Pareto-Improving Immigration in an Economy with Equilibrium Unemployment," Economic Journal, Royal Economic Society, vol. 110(460), pages 92-112, January.
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